Dear investors and partners,
We're delighted to introduce our brand new weekly blog, an initiative designed to keep you up to date with the latest developments in the financial markets and our investment strategy.
In this first issue, we share our analysis of recent trends, including the notable shift in rate cut expectations and the impact of our strategic decisions on portfolio performance. You'll also discover how we've adapted our risk management and income portfolio strategy to effectively navigate this market environment.
We'll cover the key economic events and indicators to watch this week, providing a solid foundation for your investment and risk management strategies.
We invite you to read this blog every Monday to keep abreast of the latest analyses and strategies. Your comments and questions are always welcome, as they enrich our community of investors.
Best regards,
Philippe Pratte
President and Portfolio Manager
-Introduction: indices on the rise
Since the beginning of the month, equities have been on an upward trend, driven mainly by movements in bonds and expectations of rate hikes. Investors have reacted positively to recent inflation data, boosting both equity and bond markets.
Last week, we observed a noticeable shift in rate cut expectations, which seems to have reached a peak of short-term optimism. This development justified profit-taking after a substantial 10% rise in our equity portfolio, leading to a cautious 35% reduction in our risk exposure.
-Risk management analysis
Last week was crucial in our risk management strategy, as after several months of evolution, the use of new advanced risk management tools seems to be responding very well to the current market context. Having captured the rebound at the beginning of the month, our decision to reduce portfolio exposure reflects a balanced approach. Despite this reduction, we were able to maintain a robust performance by taking advantage of the Nasdaq's active upside and matching the risk associated with the S&P 500.
-Income portfolio strategy
With regard to our income portfolio, we have proactively lengthened the maturity curve of our bonds to maximize cash flow, anticipating short-term rate stability. This strategy is underpinned by current economic data, which continues to provide solid support despite ongoing market volatility.
In conclusion, our current position remains cautious but opportunistic, seeking to balance risk while capturing growth opportunities in a constantly evolving market.
-What we're watching this week
In the days ahead, our attention will focus on several key economic indicators and market events that could influence our investment and risk management strategies.
Here are the highlights:
Monday, November 20
- At 8:30 am New York time, Bloomberg Economics will host a conference call to explore the key economic and market themes for the week ahead.
- No major release of economic data is planned.
- At 1:00 pm, the US Treasury will sell $16 billion of 20-year bonds.
Tuesday, November 21st
- At 10:00 a.m., existing home sales for October will be published. A decline is expected, influenced by high interest rates and the expectation of Fed rate cuts next year.
- At 1:00 pm, TIPS auction at 10 years.
- At 2:00 pm, publication of the minutes of the FOMC meeting of October 31 - November 1, which could offer an insight into the Fed's current vision of monetary policy and the state of the economy.
Wednesday, November 22
- At 8:30 am, publication of durable goods orders for October. A decline is expected, mainly due to lower orders in the transportation sector.
- Also at 8:30 a.m., initial jobless claims for the week ending November 18 will be published.
Thursday, November 23
- No major economic data releases are expected. US markets will be closed for Thanksgiving.
Friday, November 24th
- No major economic data releases expected. US markets close early.
- Strategy Analysis
- US equity market: Equities may find it difficult to regain their previous highs. Small caps may offer greater upside potential than large caps.
- US fixed income market: Treasury bonds could see double-digit yields in 2024, with a recession expected early in the year followed by a tepid recovery.
- Commodities market: With falling commodity prices and PPI, the risk of recession could increase in 2024.
These events and data will be crucial in refining our understanding of market trends and adjusting our strategies accordingly. Stay tuned to future developments by joining us every Monday for a fresh look at the financial markets.
Thanks for reading and see you next week!
PrattePM is registered with the Autorité des marchés financiers (AMF) and the Ontario Securities Commission (OSC).
Intended to provide general information on markets and securities and not to meet your specific needs, this newsletter is the result of the author's own research. The opinions (including recommendations, if any) expressed in this newsletter are those of the author only and do not necessarily represent those of Pratte Portfolio Management . They do not constitute investment advice intended to meet your specific needs.
The information contained in this newsletter has been obtained from sources believed to be reliable, but its accuracy and completeness cannot be guaranteed, and in providing it, the author and Pratte Portfolio Management assume no responsibility. This information was current as of the date of this newsletter, and neither the author nor Pratte Portfolio Management assumes any obligation to update it or to report any developments with respect to this information. This newsletter is intended for distribution in jurisdictions where the author and Pratte Portfolio Management are registered to trade in securities. Distribution or dissemination of this bulletin in any other jurisdiction is prohibited. The author,Pratte Portfolio Management its affiliates and their respective directors, officers and employees, as well as the companies with which they are associated may, from time to time, hold securities referred to in this bulletin.
